UK markets were closed on Thursday and Friday which contributed to choppy Sterling selling amid a lack of liquidity. The UK currency posted net gains on Thursday, but reversed sharply on Friday as risk appetite deteriorated again while overall confidence in the UK economy remained depressed. With equity markets moving lower, Sterling dipped to lows against the dollar. CFTC data recorded a net decline in short non-commercial Sterling positions to just above 74,000 contracts in the latest week from over 80,000 previously. Political developments will be monitored during the week with further speculation that Prime Minister Johnson will face a confidence vote from Conservative MPs.
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The final Euro-zone PMI services index was revised down to 56.1 from the flash reading of 56.3 and the Euro was subjected to renewed selling ahead of Friday’s New York open. CFTC data recorded a further increase in long Euro positions to over 52,000 contracts for the latest week from just below 39,000 previously which suggests limited net scope for further Euro gains.
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US non-farm payrolls increased 390,000 for May after a revised increase of 436,000 the previous month and above consensus forecasts of 325,000. The manufacturing employment increase was held to 18,000 while there was a 36,000 increase in construction jobs. There was, however, a sharp decline in retail jobs of 60,000 for the month which will maintain some concerns over the spending outlook. The unemployment rate was held at 3.6% and marginally above expectations of 3.5% as the participation rate edged higher and the household survey recorded an employment increase of over 320,000 for the month. Average hourly earnings increased 0.3% for May and slightly below market expectations with the year-on-year retreat edging lower to 5.2% from 5.5% which met consensus forecasts. There was choppy dollar trading after the US data with the dollar unable to sustain gains. The ISM non-manufacturing index retreated to 55.9 for May from 57.1 and slightly below expectations of 56.4. Business activity growth slowed, but there was a stronger rate of growth in new orders for the month. The employment index edged back into positive territory, but there were further uncertainties whether this reflected weaker demand or on-going supply-side difficulties. There was a slight easing of price pressure for the month with the prices index at a 4-month low.
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